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VMware Looks More Like a Winner

The multiple shifts in leadership with EMC may hint at a merger


VMWare NYSE:VMWWhen word hit that Paul Maritz was leaving his CEO post at VMware (NYSE:VMW), the initial response was sharp drop in the stock. When it comes to enterprise software, he’s one of the best operators in the world. Before joining VMware, Maritz was the executive vice president of the Platforms Strategy and Developer Group at Microsoft (NASDAQ:MSFT).

Despite this, it looks like his unexpected departure from VMware is actually a good thing.

First of all, Maritz will now become the chief strategist at EMC (NYSE:EMC), which owns about 80% of VMware. The buzz is that he will eventually take the EMC CEO spot from Joe Tucci.

As for VMware, it will get Pat Gelsinger as its new leader. He was president and chief operating officer of EMC’s information products division. Yes, he’s also a top-notch operator in the tech world. He once served as the chief technology officer at Intel (NASDAQ:INTC).

No doubt, this all sounds a bit confusing, but a strategic purpose is at work here. The leadership changes show the growing ties between VMware and EMC. Both companies continue to benefit from megatrends like cloud computing, virtualization and data-center automation.

This explains why VMware’s stock had a nice boost yesterday (about 12%). It certainly helped that it — along with EMC — reported strong preliminary earnings. VMware, for example, expects to see a 22% increase in second-quarter revenues to $1.123 billion. EMC forecasts growth of about 10%.

So, while the global economy slows, there seems to be little impact on VMware or EMC. Then again, both companies have critical technologies. And yes, they’re looking to the long term and making sure there’s enough time to transition to a new leadership structure.

Keep in mind that the executive changes may really be a prelude to a merger of VMware and EMC. That would create a software powerhouse, which will be important in dealing with the emerging competition from rivals like Oracle (NASDAQ:ORCL), IBM (NYSE:IBM) and Microsoft.

Oh, and to make that happen, EMC will probably need to pay a premium to VMware shareholders, which would be a nice potential bonus.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of the upcoming book How to Create the Next Facebook: Seeing Your Startup Through, from Idea to IPO.  Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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